A blog about litigation in the EU Courts and beyond.

Case C-331/13 Nicula: Repayment of tax levied

This judgment concerns the payment of a special tax (and its repayment by the Member State concerned) imposed upon the first registration of a motor vehicle in Romania. Initially this tax was introduced as a motor vehicle pollution tax by an order of 2008 (‘the 2008 Order’) and it was later replaced by the environmental stamp duty by an order of 2013 (‘the 2013 Order’) following the judgments in Case C-402/09Tatu (EU:C:2011:219) and Case C-263/10 Nisipeanu (EU:C:2011:466) which found such pollution tax to be contrary to EU law.

The case in the main proceedings was initiated when Mr. Nicula, who bought a second-hand motor vehicle registered for the first time in Germany, was required to pay a sum (around 5 000 RON) by way of pollution tax in order to register the vehicle in Romania. He then brought an action against the recipient authority on the ground that the tax had been introduced in breach of Article 110 TFEU. While the case was pending before the Romanian courts, the 2013 Order introduced the environmental stamp duty. On the basis of the calculation of the duty according to the latter Order, Mr. Nicula had to pay an increased sum of around 8 000 RON. Thus, according to the national court’s view on the basis of the 2013 Order, Mr Nicula is not entitled to recover the pollution tax and any interest thereon because the corresponding amount withheld by the tax and environmental authorities in lieu of environmental stamp duty is greater that the pollution tax paid by Mr. Nicula. Accordingly, the national court decided to stay the proceedings and refer a question to the Court of Justice (‘CoJ’) as to whether such process provided for by the 2013 Order is in line with Article 6 TEU, Articles 17, 20 and 21 of the Charter and Article 110 TFEU.

In its judgment, the CoJ rejects first the argument brought by the Romanian Government that the request is inadmissible. The CoJ finds it clear that its response to the interpretation requested by the referring court is necessary for that court to give a ruling on the compatibility with EU law of the national legislation at issue in the main proceedings. Thus, that is not a case where the CoJ may refuse to answer the questions referred, i.e. where it is obvious that the sought interpretation of EU law bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical or where the CoJ does not have before ti the factual or legal material necessary to give a useful answer to the questions referred (see Case C-261/08 Zurita Garciaand Choque Cabrera).

As regards the substance of the case, the CoJ finds that such a system of repayment of a tax levied is in breach of EU law. In particular, the CoJ states that the right to a refund of taxes levied by a Member State in breach of rules of EU law is the consequence and complement of the rights conferred on individuals by provisions of EU law prohibiting such taxes, as interpreted by the Court. A Member State is therefore in principle required to repay charges levied in breach of EU law. Furthermore, where a Member State has levied taxes in breach of the rules of EU law, individuals are entitled to reimbursement not only of the tax unduly levied but also of the amounts paid to that State or retained by it which relate directly to that tax (see judgment in Littlewoods Retail and Others, C‑591/10, EU:C:2012:478, paragraphs 24-25). Thus, the Member State is under the obligation to repay with interest amounts of tax levied in breach of EU law.

In the case at hand, it has previously been held that Article 110 TFEU precludes such a pollution tax (see, to that effect, judgments in Tatu, EU:C:2011:219, paragraphs 58 and 61, and Nisipeanu, EU:C:2011:466, paragraphs 27 and 29).The CoJ has held that the application of the provisions of the 2008 Order had the effect that imported second-hand vehicles of considerable age and wear were subject to a tax which could approach 30% of their market value, while similar vehicles offered for sale on the domestic second-hand vehicle market, which constituted similar domestic products within the meaning of Article 110 TFEU, were not burdened by such a tax charge. The Court concluded that such a measure discouraged the placing in circulation in that Member State of second-hand vehicles purchased in other Member States without discouraging buyers from purchasing second-hand vehicles of the same age and condition on the domestic market.

Following the judgments in Tatu (EU:C:2011:219) and Nisipeanu (EU:C:2011:466), Romania adopted the 2013 Order which introduces a new tax on motor vehicles, namely the environmental stamp duty.

The 2013 Order also introduces a system for repaying the tax paid, in particular, under the 2008 Order allowing individuals to obtain repayment of the tax paid previously provided that the amount of that tax exceeds that of the environmental stamp duty. The national court submitted that it is not open to it under that provision to order that, first, the amount which Mr Nicula had to pay by way of pollution tax and, secondly, the interest relating thereto, be repaid to him.

Does a system of repayment by offsetting make it possible for individuals effectively to exercise the right available to them under EU law to seek a repayment of the tax improperly paid?

A system of repayment such as that at issue in the main proceedings has the effect, in the case of a second hand vehicle imported from another Member State, of restricting or, as in the main proceedings, completely eliminating the requirement to repay the pollution tax levied in breach of EU law, which perpetuates the discrimination established by the Court in the judgments in Tatu (EU:C:2011:219) and Nisipeanu (EU:C:2011:466).

In addition, the effect of that system is to exempt the national authorities from the requirement to take account of the interest payable to the taxpayer for the period between the date of the undue levying of the pollution tax and the repayment thereof.

Thus, such a system of repayment of a tax levied is in breach of EU law, the CoJ finds.